The business behind UCF basketball

UCF basketball's historic first appearance in the Top 25 this week is more than a source of bragging rights for the team, its boosters and fans.

The national ranking couldn't come at a better time for the business behind the basketball.

The University of Central Florida's home court is the centerpiece of the largest construction project in the school's history: a $242 million development that includes the 10,000-seat arena, retail shops, student housing and a parking garage.

The complex opened in the fall of 2007, just before the worst recession since World War II got under way.

As a result, the economy has taken its toll on the town-like social center near the school's new football stadium. High turnover and empty storefronts plague the retail space. The pull-back in consumer spending has slowed ticket sales and concession revenue for concerts and other events. And a naming-rights deal for the arena itself — projected before the start of construction to be worth $250,000 a year — never materialized.

Overall revenue have sunk so low that the university may be forced to dip into the project's reserve fund before the end of the fiscal year in June.

"It's probable that we will use some of that reserve," UCF Chief Financial Officer Bill Merck said. "A lot of what we're affected by is the state of the national economy. The thing that makes me feel good [about the project] is we've got so many reserves backing it up. I feel confident we'll weather this downturn."

With the basketball team having gone undefeated so far this year season, beating the Gators and snagging the No. 24 spot in the latest Associated Press poll, school officials are hoping the exposure not only sells more tickets and merchandise but helps clinch a naming-rights deal.

The on-court victories, combined with an apparent willingness by some companies to start spending again, has raised the hopes of university officials that a deal will eventually get done.

"We're not anywhere near signing anybody at the moment," said Rick Walsh, chairman of UCF's Board of Trustees. "But we're starting to see some cracks in the credit freeze. When that happens, business starts moving again."

Such a deal — a crucial part of the center's balance sheet and income statement before UCF sold the bonds to finance its construction — would help alleviate pressure on the project.

The development has largely been sustained by the student housing — apartment-style buildings that are the most popular and expensive housing option on campus. The dorms account for more than 60 percent of the project's revenue.

The retail complex, anchored by a Barnes & Noble bookstore and several campus eateries, was just 73 percent occupied last summer, according to the most recent financial statements.

Since then, a Veterans Academic Resource Center and a Domino's Pizza have been added to the mix. Merck said he expects a yogurt shop and other businesses to move in soon, though the university is being "very choosy" as it tries to find retailers who can survive the seasonal foot traffic that comes and goes on campus.

Taken as a whole, the arena complex and the $64 million Bright House Networks Stadium, built at the same time with a separate bond issue, have withstood the nation's and the region's economic malaise since their opening three years ago.

The nearby football stadium has had its share of challenges. Some of the private donors who pledged about $6 million toward the project have asked to stretch out their payments over a longer period of time because of the sour economy.

But while the stadium didn't sell out once all year — rows of empty seats are part of the scenery at Knights games — UCF is actually exceeding the conservative attendance estimates made before the stadium's construction.

The football team, which also appeared for the first time this year in a national Top 25 ranking and won its conference title, attracted a naming-rights partner before the 45,000-seat stadium had opened. Bright House Networks agreed to pay $15 million over 15 years.

The university all along had expected a much smaller deal for the basketball arena — but didn't anticipate going more than three years without any kind of deal at all.

Perhaps the basketball team's winning streak will boost the arena's bottom line. And that can only help the rest of the project, which in turn is good for the university and its role as an economic engine.

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